According to a recent assessment by S&P Global, India’s ambitious goal of reaching net-zero emissions by 2030 depends on a significant acceleration in the adoption and growth of green hydrogen technology. This critical sector has emerged as a cornerstone of the country’s energy transition strategy, demanding concerted efforts in investment, policy reform, and infrastructural development to achieve its vast potential.
The Role of Green Hydrogen in India’s Energy Goals
Green hydrogen is more than a fuel source; it represents a transformative shift in the global energy landscape. It is an essential part of India’s shift to a low-carbon economy. However, the current pace of progress indicates that achieving the interim milestones may be delayed by a decade unless immediate and substantial measures are taken.
India’s energy strategy revolves around four key investment themes: enhancing energy efficiency, expanding renewable energy capacity, adopting low-emission fuels, and fostering sustainable mobility solutions. Despite these efforts, a significant gap remains in scaling up the production and adoption of green hydrogen, which could jeopardize the country’s climate commitments.
Policy Framework and Investment Gaps
The Indian government has established a robust policy framework to encourage the adoption of cleaner energy technologies. This includes a mix of subsidies, mandates, taxes, and incentives designed to promote investment in renewable energy and low-carbon solutions. However, historical investment trends reveal a disproportionate allocation toward fossil fuels, which have received 37% of average investments in the energy sector over the past five years. In contrast, only 5% of investments have been directed toward green energy solutions, including green hydrogen.
This imbalance underscores the need for a fundamental shift in investment priorities. The establishment of a carbon market framework and the development of a climate finance taxonomy are steps in the right direction. However, these measures must be complemented by targeted policies that prioritize the deployment of green hydrogen and other renewable technologies.
Challenges in Energy Transition
One of the primary challenges in India’s energy transition is the stark difference in returns between traditional fossil fuel companies and emerging renewable energy firms. Despite growing interest in green technologies and increasing stock valuations in the renewable sector, traditional oil and gas companies have consistently outperformed renewable firms in capital returns. Over the last five years, these companies have delivered an average of 8.3% higher returns, presenting a significant barrier to shifting investment focus.
Natural gas, which currently constitutes 6% of India’s energy mix, is another critical component in the transition away from coal. The government has set a target to increase this share to 15% by 2023, emphasizing its role in enhancing the flexibility of India’s energy system. However, gas alone cannot meet the demands of a growing economy transitioning to renewables. The integration of green hydrogen alongside renewable energy sources like solar and wind is essential for building a resilient and sustainable energy ecosystem.
Critical Minerals and Domestic Exploration
India’s energy transition also hinges on securing critical minerals essential for technologies like batteries, solar panels, and green hydrogen electrolysers. To address this, initiatives like Khanij Bidesh India have been established to secure global access to these minerals. However, a more robust focus on domestic exploration and processing is required to reduce dependency on imports and ensure a steady supply of raw materials.
Building a competitive domestic supply chain for manufacturing batteries, electrolysers, and photovoltaic systems is imperative. This involves not only securing raw materials but also developing a skilled workforce and leveraging government procurement policies to support local industries.
Power Sector Reforms
Reforming India’s power sector is critical to addressing persistent challenges like high transmission and distribution losses and operational inefficiencies. Creating a competitive market environment and encouraging private sector participation can significantly enhance grid reliability and facilitate the integration of renewable energy sources, including green hydrogen. By modernizing the power infrastructure, India can better manage the complexities of a diversified energy mix.
Promoting Energy Efficiency and Sustainable Practices
For the purpose of enhancing total production, energy-intensive businesses are required to implement cutting-edge technologies that are efficient. The building and public transportation industries, both of which are large contributors to overall energy use, provide enormous prospects for optimization. The expansion of energy-efficient cooling solutions and the promotion of localized renewable energy systems are two ways to further lower the demand for energy while simultaneously guaranteeing that more people have access to electricity.
Energy access issues that have persisted for a long time can be resolved in rural regions through the implementation of decentralized renewable energy solutions that are backed by public-private partnerships. In addition, encouraging research and development in off-grid technologies would be of great assistance in bridging the gap between the energy requirements of urban and rural areas.
Financing the Energy Transition
To unlock the full potential of green hydrogen and other renewable technologies, India must create a conducive environment for clean energy investments. This includes facilitating green bond issuances and introducing innovative financing models to attract private capital. Financial institutions need to build capacity to manage large-scale green projects, ensuring the efficient allocation of funds and timely project execution.
Developing a comprehensive climate finance ecosystem, supported by international collaborations and domestic reforms, can accelerate the deployment of green hydrogen technologies and infrastructure. Strengthening these financial mechanisms is crucial to overcoming the economic barriers associated with renewable energy adoption.
The Path Forward
The successful transition to a low-carbon economy in India depends on a multifaceted approach that addresses both technological and policy challenges. Green hydrogen stands out as a game-changer in this context, offering a clean, sustainable, and scalable energy solution. By aligning investment strategies, enhancing policy support, and fostering innovation, India can position itself as a global leader in the green hydrogen economy.
The journey ahead is complex but promising. With focused efforts on boosting domestic manufacturing, securing critical minerals, reforming the power sector, and leveraging public-private partnerships, India can achieve its net-zero goals. Scaling up the production and use of green hydrogen will not only contribute to reducing emissions but also create new economic opportunities, ensuring a sustainable and prosperous future for the country.